Buffett Takes Stake In Swiss Re

Swiss Re announced today that Berkshire Hathaway headed by Warren Buffett has acquired a 3 percent stake in the company and the firm has entered into a reinsurance contract for property-casualty business with Berkshire Hathaway.

Capital released as a result of the reinsurance contract with the Omaha, Neb.-based company, Swiss Re said, will be used for a $1.6 billion share buyback.

The proportional reinsurance contract with Berkshire Hathaway involves a quota-share arrangement, where Berkshire Hathaway will assume a 20 percent share of all Swiss Re's property and casualty business for the next five years.

The contract is effective as of Jan. 1, 2008. This will lead to a reduction in the capital deployed in Swiss Re's p-c business, the reinsurer said.

As a result, Swiss Re said it intends, in addition to its previously announced buy-back program, to acquire its own shares in the market for general treasury purposes up to a total value of CHF 1.75 billion ($1.6 billion).

The buyback, the firm said, is expected to be completed over the next 24 months as the capital relief resulting from the quota share arrangement is achieved.

Swiss Re said as a result it now targets a total buyback, including shares already re-purchased, of up to CHF 7.75 billion ($7.1 billion). Since March 1, 2007, Swiss Re said it has repurchased 16,650,479 shares from General Electric Company and 11,083,000 shares under its existing buy-back program.

Swiss Re's Chief Executive Officer, Jacques Aigrain, commented, “This reinsurance arrangement is further evidence of our commitment to actively manage the p-c cycle in the best interest of our shareholders.

The additional capital efficiency as well as the downside protection will permit Swiss Re to retain flexibility in a softening property and casualty market. The arrangement also underlines the strength of our underwriting capabilities. It will allow us to increase capacity rapidly should pricing conditions improve. Furthermore, it will advance our efforts to manage earnings volatility–a key strategic priority.”